Press Release

Perspective from China: Consumer-products companies are wasting 60% of their digital-transformation investments, according to AlixPartners survey

August 2019

Almost $50 billion annually in digital advertising and trade spend is failing to drive positive ROI

Digital commerce is a $220 billion growth opportunity for the industry

Lack of talent, lack of funding and corporate culture identified as amongst the key impediments to successful transformation

Profitable growth can only be achieved through targeted, measured, and tailored strategies

Shanghai (August 20, 2019) – AlixPartners, the global consulting firm, today announced the results of a new survey of senior executives internationally in the consumer products industry which found that more than half of companies’ digital-transformation investments, in the form of marketing and trade spend, are being wasted.

The firm surveyed 1,110 executives across China, France, Germany, India, the UK, and the US, who are or have been decision makers for digital transformation in consumer products companies, to better understand how consumer products companies can successfully drive profitable growth in today’s challenging environment. Each participant represented an organization in either the food & beverage, household products, or health & beauty sectors. Respondents were asked to rate their organization’s digital proficiency as being either leading, developing or emerging.

The survey finds that companies across countries have a very different view on how advanced they are along the digital journey. 62% of Chinese companies surveyed regard themselves in the “developing” stage of digital transformation, the highest among other countries surveyed. And 30% Chinese companies think they are still in the “emerging” stage along the path, and only 8% rated themselves as “leaders”, indicating a notable gap with the most digitized countries India (48%) and the U.S. (34%).

The AlixPartners survey also found that physical and digital routes to market continue to converge rapidly, and for companies describing themselves as the most advanced in the digital journey, this convergence has largely already occurred. By 2023, AlixPartners’ accompanying report estimates that digital sales of consumer products will grow by approximately double from today’s $218 billion per annum to around $440 billion. For many mature companies with relatively flat revenues in their traditional channels, digital can be a significant driver of future growth, the report says.

Michael McCool, Managing Director at AlixPartners says, “China leads the world in online sales of consumer products. Tmall, for example, opens the direct to consumer channel to almost all consumer product companies. Though global leaders expect soon to sell more than 30% of their volumes through their own and third-party online platforms, very few have yet implemented technology to fully exploit these channels and are lagging especially in tools for forecasting, pricing and capturing customer insights.”

However, in pursuing this growth opportunity, many executives surveyed cited low returns on their investments. Of the $79 billion spent globally on online advertising and trade spend (everything from ads on Facebook and YouTube to digital coupons and discounts) in 2018, an extrapolation from the survey’s results suggests that over 60%, or about $47 billion, failed to deliver an observable a positive return on investment.

The survey showed that no matter where consumer-products companies are on their digital journey, barriers to successful digital transformation still exist. Views inside companies differ on where they are on that journey, with those executives operating in functional areas of their businesses viewing the process as lagging versus the views of their more-senior colleagues, such as those at the C-suite level. As to the impediments to success, lack of talent (cited by 39% of all respondents on average as a top-three barrier), lack of funding (cited by on average 35%), and an unwillingness to experiment (cited by on average 34%) were raised across the board. Notably, those respondents who consider their organizations as leaders in digital transformation identified culture as a key factor, with 34% rating that as a top-three barrier, in marked contrast to those identifying culture as being a top impediment in developing (12%) and emerging (10%) companies.

“The survey highlights that companies which are ahead in digital are more aware of the need to overcome cultural and behavioral barriers to success in their organizations. The leaders did not identify cultural barriers at the outset of their journey, rather the more progress they made with digital the more the cultural barriers became visible. If you are not finding similar challenges in your own organization then you are probably not so far along as you think,” says Michael McCool. “Success is achievable over time by using more precise and targeted methods, which have greater opportunities for consumer engagement and data analytics.”

AlixPartners is a results-driven global consulting firm that specializes in helping businesses successfully address their most complex and critical challenges. Our clients include companies, corporate boards, law firms, investment banks, private equity firms, and others. Founded in 1981, AlixPartners is headquartered in New York, and has offices in more than 20 cities around the world. For more information, visit www.alixpartners.com.